Question

The book value of a firm's equity is $100 million and its market value of equity is $200 million. The facevalue of its debt is $50 million and its market value of debt is $60 million. What is the market value of assetsof the firm?A) $150 million B) $250 million C) $160 millionD) $260 million

Answer 1

Answer:

D) $260 million

Explanation:

Using the accounting equation which states that

Assets = shareholder's equity + liabilities

Market value of assets = market value of equity + market value of debt (liabilities)

Market value of equity = $200 million

Market value of debt = $60 million

Market value of assets = $200 million + $60 million

                                      = $260 million

The right option is D) $260 million